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Veritex Holdings, Inc. Reports Record Third Quarter Financial Results; Strong Organic Loan Growth Continues Through 2017

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DALLAS, Oct. 23, 2017 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. ("Veritex" or the "Company") (NASDAQ:VBTX), the holding company for Veritex Community Bank, announced today the results for the quarter ended September 30, 2017. The Company reported net income available to common stockholders of $5.1 million, or $0.25 diluted earnings per share ("EPS"), compared to $3.6 million, or $0.23 diluted EPS, for the quarter ended June 30, 2017 and $3.4 million, or $0.31 diluted EPS, for the quarter ended September 30, 2016.

Core net income, calculated as net income adjusted for the impact of income recognized on acquired loans and merger and acquisition costs, totaled $5.7 million for the quarter ended September 30, 2017, an increase of $2.0 million and $2.2 million from the quarters ended June 30, 2017 and September 30, 2016, respectively. Core diluted EPS for the quarter ended September 30, 2017 was $0.28, compared to $0.23 and $0.31 for the quarters ended June 30, 2017 and September 30, 2016, respectively.(1)

C. Malcolm Holland, the Company's Chairman and Chief Executive Officer, said, "I am thrilled with our third quarter accomplishments. We closed the acquisition of Sovereign Bancshares, Inc., announced the merger with Liberty Bancshares, Inc. and successfully completed a public offering of our common stock. Our organic growth continued to be strong. Loan balances, excluding acquired Sovereign loans, have grown $183.9 million over December 31, 2016 balances, or at a 24.8% annualized rate. As we finish out 2017, we are excited about all the opportunities in the thriving business communities we currently serve and the new partnerships we will create through our merger with Liberty.

Third Quarter 2017 Highlights

  • Closed Sovereign Bancshares, Inc. ("Sovereign") acquisition on August 1, 2017 and completed system conversion and integration during the third quarter
  • Announced acquisition of Liberty Bancshares, Inc. ("Liberty") on August 1, 2017
  • Completed a public offering of 2,285,050 shares of common stock with net proceeds of $56.7 million
  • Organic loan growth, excluding loans acquired from Sovereign, was 4.8% or 18.9% annualized compared to June 30, 2017 and 18.5% or 24.8% annualized compared to December 31, 2016
  • Received American Bankers'  "Best Bank to Work For" for the fourth consecutive year

Result of Operations for the Three Months Ended September 30, 2017
Net Interest Income

For the three months ended September 30, 2017, net interest income before provision for loan losses was $19.1 million and net interest margin was 3.78% compared to $12.4 million and 3.53%, respectively, for the three months ended June 30, 2017. The $6.7 million increase from the three months ended June 30, 2017 was primarily due to an increase in interest income on loans, which was driven by increased volume in all loan categories resulting from loans acquired from Sovereign on August 1, 2017 of $750.9 million, as well as organic loan growth during the third quarter of 2017 of $53.3 million. Net interest margin increased 25 basis points from the three months ended June 30, 2017 primarily due to a change in mix of earning assets resulting from increases in loans, which tend to yield greater interest rates than other interest earning assets such as investment securities and interest bearing deposits in other banks. Average loan balances represented 81.9% of average interest-earnings assets for the three months ended September 30, 2017 compared to 76.2% for the three months ended June 30, 2017. In addition, the average yield on loan balances increased to 5.00% from 4.88% for the three months ended September 30, 2017 compared to the three months ended June 30, 2017 which was primarily driven by $585 thousand in estimated accretion during the third quarter of 2017 on loans acquired from Sovereign. The estimated accretion on the estimated purchase discount for loans acquired from Sovereign increased the average yield on loans by approximately 14 basis points for the three months ended September 30, 2017.

(1) As used in this release, core net income and core diluted EPS are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to their comparable GAAP measures, see pages 10 and 11 of this release.

Net interest income before provision for loan losses increased by $8.6 million from $10.5 million to $19.1 million for the three months ended September 30, 2017 as compared to the same period during 2016. The increase in net interest income before provision for loan losses was primarily driven by higher loan balances resulting from the merger with Sovereign and organic loan growth. For the quarter ended September 30, 2017, the average loan balance increased by $689.0 million compared to the quarter ended September 30, 2016, which resulted in a $9.1 million increase in interest income. The net interest margin increased to 3.78% during the three months ended September 30, 2017 from 3.70% for the same three-month period in 2016. The 8 basis point increase in net interest margin was primarily due to a change in mix of earning assets resulting from increases in loan balances. The average yield on loan balances increased to 5.00% from 4.83% for the three months ended September 30, 2017 compared to the same period during 2016. The increase in the average yield for loans is due to the aforementioned 14 basis points attributable to the estimated accretion on loans acquired from Sovereign as well as the associated increases in the targeted Fed Funds rate which resulted in increases in yields in prime-based loans since September 30, 2017.

Noninterest Income

Noninterest income for the three months ended September 30, 2017 was $2.0 million, an increase of $211 thousand or 11.9% compared to the three months ended June 30, 2017. The net increase was primarily due to a $205 thousand increase in the gain on sale of securities which resulted from the sale of Sovereign investment securities that did not fit our investment strategy. In addition, the increase was due to a $114 thousand increase in services charges and fees on deposit accounts resulting from the additional acquired Sovereign deposit accounts and the associated income from these accounts. This increase was partially offset by a $102 thousand decrease in gain on sale of mortgage loans as a result in the decline in mortgage originations for the three months ended September 30, 2017 compared to the three months ended June 30, 2017.

Compared to the three months ended September 30, 2016, noninterest income for the three months ended September 30, 2017 grew $84 thousand or 4.4%. The increase was primarily due to a $205 thousand increase in gain on sale of securities as referenced above and a $236 thousand increase in services charges and fees on deposit accounts as described above. This increase was partially offset by a $331 thousand decrease in gain on sale of mortgage loans for the three months ended September 30, 2017 compared to the three months ended September 30, 2017.

Noninterest Expense

Noninterest expense was $12.5 million for the three months ended September 30, 2017, compared to $7.8 million for the three months ended June 30, 2017, an increase of $4.7 million or 60.9%. The increase was primarily driven by a $2.3 million increase in salaries and employee benefits expense, primarily due to the addition of 100 full-time equivalent employees related to the Sovereign acquisition. Compared to the second quarter of 2017, professional fees increased $785 thousand which were primarily a result of the use of legal and other professional services associated with the Sovereign and Liberty acquisitions. Occupancy and equipment expense increased $581 thousand primarily due to the addition of six owned buildings and five property leases from the Sovereign acquisition. Data processing and software expense increased by $347 thousand as the Company converted Sovereign's operating systems into the Veritex information technology infrastructure.

Compared to the three months ended September 30, 2016, noninterest expense for the three months ended September 30, 2017 increased $5.5 million, or 78.1%. The increase was primarily related to the Sovereign acquisition for the reasons described in the preceding paragraph.

Income Taxes

Income tax expense for the three months ended September 30, 2017 totaled $2.7 million, an increase of $848 thousand, or 47.1%, compared to the three months ended June 30, 2017. The Company's effective tax rate, before reporting the net impact of discrete items, was approximately 34.2% and 34.5% for the three months ended September 30, 2017 and the three months ended June 30, 2017, respectively. The change in income tax expense from the three months ended June 30, 2017 was primarily due to the $2.4 million increase in net operating income and decrease in net discrete tax benefit from $83 thousand for the three months ended June 30, 2017 to $30 thousand for the three months ended September 30, 2017. The net discrete tax benefit for the three months ended September 30, 2017 was primarily associated with the recognition of excess tax benefit realized on share-based payment awards. The Company's effective tax rate, after including the net impact of discrete tax items, was approximately 33.8% and 32.0%, respectively for the three months ended September 30, 2017 and June 30, 2017, respectively.

Compared to the three months ended September 30, 2016, income tax expense increased $882 thousand, or 49.9%, to $2.7 million for the three months ended September 30, 2017. The Company's effective tax rate, before reporting the net impact of discrete items, was approximately 34.2% for the three months ended September 30, 2017 compared to 34.4% for the three months ended September 30, 2016. There were no discrete tax items during the three months ended September 30, 2016. The change in income tax expense from the three months ended September 30, 2016 was primarily due to the increase in net operating income of $2.7 million offset by the impact of the net discrete tax benefit of $30 thousand during the three months ended September 30, 2017. The Company's effective tax rate, after including the net impact of discrete tax items, was approximately 33.8% and 34.4% for the three months ended September 30, 2017 and 2016, respectively.

Financial Condition

Loans (excluding loans held for sale and deferred loan fees) at September 30, 2017 were $1.9 billion, an increase of $785.0 million or 69.9% compared to $1.1 billion at June 30, 2017, with $731.6 million of growth resulting from loans acquired from Sovereign. The below table details the components of linked quarter growth in loans compared to June 30, 2017:

  Acquired from
Sovereign
  Change in
Sovereign loan
balances since
acquisition
  Organic growth
(legacy Veritex
balances)
  Total linked-
quarter growth
  % Change
excluding
acquired loans
  % Change
including
acquired loans
Real Estate $ 538,025     $ (23,134 )   $ 38,788     $ 553,679                   5.0  %                 71.7 %
Commercial 211,588     4,071     15,262     230,921     4.4  %   66.5 %
Consumer 1,243     $ (98 )   $ (704 )   441     (19.1 )%   12.0 %
Total linked-quarter growth    750,856     (19,161 )   53,346     785,041     4.8  %   69.9 %

Loans (excluding loans held for sale and deferred loan fees) at September 30, 2017 increased $980.8 million, or 105.8%, compared to $926.7 million at September 30, 2016, with $731.6 million of growth resulting from loans acquired from Sovereign. The below table details the components of the year-over-year growth in loans compared to September 30, 2016:

  Acquired from
Sovereign
  Change in
Sovereign loan
balances since
acquisition
  Organic growth
(legacy Veritex
balances)
  Total year-over-
year Growth
  % Change
excluding
acquired loans
  % Change
including
acquired loans
Real Estate $ 538,025     $ (23,134 )   $ 161,541     $ 676,432                  24.9  %             104.2  %
Commercial 211,588     4,071     88,870     304,529     32.5  %   111.4  %
Consumer 1,243     $ (98 )   $ (1,309 )   (164 )   (30.5 )%   (3.8 )%
Total year-over-year growth  750,856     (19,161 )   249,102     980,797     26.9  %   105.8  %

Deposits at September 30, 2017 were $2.0 billion, an increase of $774.6 million, or 64.0%, compared to June 30, 2017 with $809.4 million resulting from deposits assumed from Sovereign. The table below breaks out the growth in deposits compared to June 30, 2017.

  Acquired from
Sovereign
  Change in
deposits balances
from linked-
quarter
  Total linked-
quarter Growth
  % Change
excluding
acquired deposits
  % Change
including
acquired deposits
Non-interest bearing $ 176,260     $ (17,690 )   $ 158,570                       (5.2 )%                       47.0 %
Interest-bearing 633,106     (17,125 )   615,981     (2.0 )%   70.5 %
Total linked-quarter growth  809,366     (34,815 )   774,551     (2.9 )%   64.0 %

Deposits increased $908.4 million, or 84.3%, compared to $1.1 billion at September 30, 2016 with $809.4 million resulting from deposits assumed from Sovereign. The table below breaks out the growth in deposits compared to September 30, 2016.

  Acquired from
Sovereign
  Change in
deposits
balances year-
over-year
  Total year-over-
year Growth
  % Change
excluding
acquired deposits
  % Change
including
acquired deposits
Non-interest bearing $ 176,260     $ 14,395     $ 190,655                         4.7 %                     62.5 %
Interest-bearing 633,106     84,680     717,786     11.0 %   92.9 %
Total year-over-year growth  809,366     99,075     908,441     9.2 %   84.3 %

Asset Quality

The allowance for loan losses as a percentage of loans was 0.55%, 0.87%, and 0.87% of total loans at September 30, 2017, June 30, 2017, and September 30, 2016, respectively. The allowance for loan losses as a percentage of total loans over the three quarter periods was determined by the qualitative factors around the nature, volume and mix of the loan portfolio. The decrease in the allowance for loan loss as a percentage of loans was attributable to the Sovereign acquisition as acquired loans are recorded at fair value.

The provision for loan losses for the three months ended September 30, 2017 totaled $752 thousand compared to $943 thousand and $238 thousand for three months ended June 30, 2017 and September 30, 2016, respectively. The decrease in provision for loan losses for the three months ended September 30, 2017 compared to June 30, 2017 was due to the general provision required from a decrease in organic loan growth compared to the prior period. The increase of $514 thousand in provision for loan losses from September 30, 2016 to September 30, 2017 was due to the general provision required from an increase in organic loan growth compared to the same period in 2016.

Non-accrual loans were $1.9 million at September 30, 2017 compared to $1.5 million at June 30, 2017 and $1.1 million at September 30, 2016.  At September 30, 2017 and June 30, 2017, non-accrual loans to our total loans held for investment was minimal at 0.10% and 0.13%, respectively.

Nonperforming assets totaled $2.6 million, or 0.11%, of total assets at September 30, 2017 compared to $2.0 million, or 0.13%, of total assets at June 30, 2017 and $2.1 million, or 0.17%, of total assets at September 30, 2016. The increase of $626 thousand in nonperforming assets compared to June 30, 2017 was primarily due to a net increase in other real estate owned of $245 thousand. The increase of $542 thousand in nonperforming assets compared to September 30, 2016 was primarily due to an increase of $466 thousand in nonperforming loans.

Non-GAAP Financial Measures

The Company's management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, the Company reviews and reports core interest income, core non-interest expense, core net income, core basic and diluted earnings per share, core efficiency ratio, core net interest margin, tangible book value per common share and the tangible common equity to tangible assets ratio. The Company has included in this release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to "Reconciliation of Non-GAAP Financial Measures" at the end of this release for a reconciliation of these non-GAAP financial measures.

Conference Call

The Company will also host an investor conference call to review the results on Tuesday, October 24, 2017 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting http://edge.media-server.com/m6/p/fbog48pq and will receive a unique pin number, which can be used when dialing in for the call. This will allow attendees to enter the call immediately. Alternatively, participants may call toll-free at (833) 696-8362.

The call and corresponding presentation slides will be webcast live on the home page of the Company's website, www.veritexbank.com. An audio replay will be available one hour after the conclusion of the call at (855) 859-2056, Conference #97830254. This replay, as well as the webcast, will be available until October 31, 2017.

About Veritex Holdings, Inc.

Headquartered in Dallas, Texas, Veritex Holdings, Inc. is a bank holding company that conducts banking activities through its wholly-owned subsidiary, Veritex Community Bank, with seventeen branch locations throughout the Dallas/Fort Worth metropolitan area, two branches in the Austin metropolitan area, two branches in the Houston metropolitan area and one mortgage office. Veritex Community Bank is a Texas state chartered bank regulated by the Texas Department of Banking and the Board of Governors of the Federal Reserve System.

For more information, visit www.veritexbank.com

Media Contact:
LaVonda Renfro
972-349-6200
lrenfro@veritexbank.com

Investor Relations:
Susan Caudle
972-349-6132
scaudle@veritexbank.com

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release may contain certain forward-looking statements within the meaning of the securities laws that are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about the Company and its subsidiaries. Forward-looking statements include information regarding the Company's future financial performance, business and growth strategy, projected plans and objectives, and related transactions, integration of the acquired businesses, ability to recognize  anticipated operational efficiencies, and other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "projects," "estimates," "plans" and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to whether the Company can: successfully implement its growth strategy, including identifying acquisition targets and consummating suitable acquisitions; continue to sustain internal growth rate; provide competitive products and services that appeal to its customers and target market; continue to have access to debt and equity capital markets; and achieve its performance goals. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to "Special Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" in Veritex's Annual Report on Form 10-K filed with the SEC on March 10, 2017 and any updates to those risk factors set forth in Veritex's subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if Veritex's underlying assumptions prove to be incorrect, actual results may differ materially from what Veritex anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and Veritex does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, and it is not possible for us to predict those events or how they may affect us. In addition, Veritex cannot assess the impact of each factor on Veritex's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements, expressed or implied, included in this communication are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Veritex or persons acting on Veritex's behalf may issue. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Consolidated Financial Highlights - (Unaudited)
(In thousands, except percentages)
 
    At and For the Three Months Ended
    September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
Selected Financial Data:                    
Net income   $ 5,182     $ 3,615     $ 3,098     $ 3,190     $ 3,375  
Total assets   2,494,861     1,508,589     1,522,015     1,408,507     1,269,194  
Total loans(1)   1,907,509     1,122,468     1,020,970     991,897     926,712  
Provision for loan losses   752     943     890     440     238  
Allowance for loan losses   10,492     9,740     8,816     8,524     8,102  
Noninterest-bearing deposits   495,627     337,057     338,226     327,614     304,972  
Total deposits   1,985,658     1,211,107     1,221,696     1,119,630     1,077,217  
Total stockholders' equity   445,929     247,602     242,725     239,088     142,423  
Summary Performance Ratios:                    
Return on average assets(2)   0.94 %   0.97 %   0.83 %   0.97 %   1.10 %
Return on average equity(2)   5.44     5.89     5.20     8.11     9.50  
Net interest margin(3)   3.78     3.53     3.21     3.44     3.70  
Efficiency ratio(4)   59.33     55.03     58.26     57.39     56.64  
Noninterest expense to average assets(2)   2.26     2.08     1.99     2.16     2.29  
Summary Credit Quality Data:                    
Nonaccrual loans   $ 1,856     $ 1,514     $ 1,686     $ 941     $ 1,087  
Accruing loans 90 or more days past due(5)   54     15     212     835     357  
Other real estate owned   738     493     998     662     662  
Nonperforming assets to total assets   0.11 %   0.13 %   0.19 %   0.17 %   0.17 %
Nonperforming loans to total loans   0.10     0.14     0.19     0.18     0.16  
Allowance for loan losses to total loans   0.55     0.87     0.86     0.86     0.87  
Net charge-offs to average loans outstanding           0.06     0.03     0.03  
Capital Ratios:                    
Total stockholders' equity to total assets   17.87 %   16.41 %   15.95 %   16.97 %   11.22 %
Tangible common equity to tangible assets(6)   12.76     14.77     14.31     15.23     9.14  
Tier 1 capital to average assets   15.26     15.09     14.65     16.82     9.82  
Tier 1 capital to risk-weighted assets   14.17     18.17     19.94     20.72     12.04  
Common equity tier 1 (to risk weighted assets)   13.65     17.92     19.66     20.42     11.72  
Total capital to risk-weighted assets   14.87     19.37     21.20     22.02     13.38  

___________________________

  1. Total loans does not include loans held for sale and deferred fees. Loans held for sale were $2.2 million at September 30, 2017, $4.1 million at June 30, 2017, $1.9 million at March 31, 2017, $5.2 million at December 31, 2016 and $4.9 million at September 30, 2016. Deferred fees were $28 thousand at September 30, 2017, $40 thousand at June 30, 2017, $48 thousand at March 31, 2017, $55 thousand at December 31, 2016, and $51 thousand at September 30, 2016.
  2. We calculate our average assets and average equity for a period by dividing the sum of our total assets or total stockholders' equity, as the case may be, at the close of business on each day in the relevant period, by the number of days in the period. We have calculated our return on average assets and return on average equity for a period by dividing net income for that period by our average assets and average equity, as the case may be, for that period.
  3. Net interest margin represents net interest income, annualized on a fully tax equivalent basis, divided by average interest-earning assets.
  4. Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.
  5. Accruing loans 90 or more days past due excludes $3.3 million of PCI loans acquired from Sovereign as of September 30, 2017. No PCI loans were considered non-performing loans as of September 30, 2017.
  6. We calculate tangible common equity as total stockholders' equity less preferred stock, goodwill, core deposit intangibles and other intangible assets, net of accumulated amortization, and we calculate tangible assets as total assets less goodwill, and core deposit intangibles and other intangible assets, net of accumulated amortization. Tangible common equity to tangible assets is a non-GAAP financial measure, and, as we calculate tangible common equity to tangible assets, the most directly comparable GAAP financial measure is total stockholders' equity to total assets. Our management believe that this measure is important to many investors in the market place who are interested in relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing both total stockholders' equity and assets while not increasing our tangible common equity or tangible assets. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures in the table captioned "Reconciliation of Non-GAAP Financial Measures – (Unaudited)."


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets - (Unaudited)
(In thousands)
 
    September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
ASSETS                    
Cash and due from banks   $ 21,879     $ 28,687     $ 23,021     $ 15,631     $ 15,837  
Interest bearing deposits in other banks   129,497     144,459     262,714     219,160     162,750  
Total cash and cash equivalents   151,376     173,146     285,735     234,791     178,587  
Investment securities   204,788     134,708     138,698     102,559     86,772  
Loans held for sale   2,179     4,118     1,925     5,208     4,856  
Loans, net   1,896,989     1,112,688     1,012,106     983,318     918,559  
Accrued interest receivable   6,387     3,333     2,845     2,907     2,414  
Bank-owned life insurance   20,517     20,369     20,224     20,077     19,922  
Bank premises, furniture and equipment, net   40,129     17,978     17,521     17,413     17,501  
Non-marketable equity securities   10,283     7,407     7,375     7,366     7,358  
Investment in unconsolidated subsidiary   352     93     93     93     93  
Other real estate owned   738     493     998     662     662  
Intangible assets, net   10,531     2,171     2,161     2,181     2,257  
Goodwill   135,832     26,865     26,865     26,865     26,865  
Other assets   14,760     5,220     5,469     5,067     3,348  
Total assets   $ 2,494,861     $ 1,508,589     $ 1,522,015     $ 1,408,507     $ 1,269,194  
LIABILITIES AND STOCKHOLDERS'
EQUITY
                   
Deposits:                    
Noninterest-bearing   $ 495,627     $ 337,057     $ 338,226     $ 327,614     $ 304,972  
Interest-bearing   1,490,031     874,050     883,470     792,016     772,245  
Total deposits   1,985,658     1,211,107     1,221,696     1,119,630     1,077,217  
Accounts payable and accrued expenses   4,017     2,574     1,631     2,914     2,082  
Accrued interest payable and other liabilities   4,368     1,032     9,655     534     1,098  
Advances from Federal Home Loan Bank   38,200     38,235     38,271     38,306     38,341  
Junior subordinated debentures   11,702     3,093     3,093     3,093     3,093  
Subordinated notes   4,987     4,946     4,944     4,942     4,940  
Total liabilities   2,048,932     1,260,987     1,279,290     1,169,419     1,126,771  
Commitments and contingencies                    
Stockholders' equity:                    
Common stock   227     152     152     152     107  
Additional paid-in capital   404,900     211,901     211,512     211,173     116,315  
Retained earnings   41,143     36,003     32,388     29,290     26,101  
Unallocated Employee Stock Ownership Plan shares   (209 )   (209 )   (209 )   (209 )   (309 )
Accumulated other comprehensive (loss) income   (62 )   (175 )   (1,048 )   (1,248 )   279  
Treasury stock   (70 )   (70 )   (70 )   (70 )   (70 )
Total stockholders' equity   445,929     247,602     242,725     239,088     142,423  
   Total liabilities and stockholders' equity   $ 2,494,861     $ 1,508,589     $ 1,522,015     $ 1,408,507     $ 1,269,194  


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income - (Unaudited)
(In thousands, except per share data)
 
    Nine Months Ended
    September 30,
2017
  September 30,
2016
Interest income:        
Interest and fees on loans   $ 45,613     $ 32,996  
Interest on investment securities   2,251     1,014  
Interest on deposits in other banks   1,787     302  
Interest on other   4     2  
Total interest income   49,655     34,314  
Interest expense:        
Interest on deposit accounts   6,201     3,388  
Interest on borrowings   696     491  
Total interest expense   6,897     3,879  
Net interest income   42,758     30,435  
Provision for loan losses   2,585     1,610  
Net interest income after provision for loan losses      40,173     28,825  
Noninterest income:        
Service charges and fees on deposit accounts   1,733     1,309  
Gain on sales of investment securities   205     15  
Gain on sales of loans   2,259     2,318  
Bank-owned life insurance   561     577  
Other   520     460  
Total noninterest income   5,278     4,679  
Noninterest expense:        
Salaries and employee benefits   13,471     10,683  
Occupancy and equipment   3,622     2,718  
Professional fees   3,959     1,861  
Data processing and software expense   1,451     850  
FDIC assessment fees   1,061     447  
Marketing   905     704  
Other assets owned expenses and write-downs   109     139  
Amortization of intangibles   413     285  
Telephone and communications   438     295  
Other   2,325     1,323  
Total noninterest expense   27,754     19,305  
Net income from operations   17,697     14,199  
Income tax expense   5,802     4,837  
Net income   $ 11,895     $ 9,362  
Preferred stock dividends   42      
Net income available to common stockholders   $ 11,853     $ 9,362  
Basic earnings per share   $ 0.70     $ 0.88  
Diluted earnings per share   $ 0.69     $ 0.85  
Weighted average basic shares outstanding   16,813     10,698  
Weighted average diluted shares outstanding   17,232     10,992  


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income - (Unaudited)
(In thousands, except per share data)
 
    For the Three Months Ended
    September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
Interest income:                    
Interest and fees on loans   $ 20,706     $ 13,024     $ 11,883     $ 11,684     $ 11,589  
Interest on investment securities   941     735     575     396     335  
Interest on deposits in other banks   629     548     610     200     129  
Interest on other   3         1     1     1  
Total interest income   22,279     14,307     13,069     12,281     12,054  
Interest expense:                    
Interest on deposit accounts   2,812     1,742     1,647     1,600     1,381  
Interest on borrowings   338     189     169     161     156  
Total interest expense   3,150     1,931     1,816     1,761     1,537  
Net interest income   19,129     12,376     11,253     10,520     10,517  
Provision for loan losses   752     943     890     440     238  
Net interest income after provision for loan             
losses
  18,377     11,433     10,363     10,080     10,279  
Noninterest income:                    
Service charges and fees on deposit accounts   669     555     509     537     433  
Gain on sales of investment securities   205                  
Gain on sales of loans   705     807     747     970     1,036  
Bank-owned life insurance   188     186     187     194     193  
Other   210     218     92     123     231  
Total noninterest income   1,977     1,766     1,535     1,824     1,893  
Noninterest expense:                    
Salaries and employee benefits   5,921     3,642     3,908     3,650     3,920  
Occupancy and equipment   1,596     1,015     1,011     949     923  
Professional fees   1,973     1,188     798     943     785  
Data processing and software expense   719     372     360     308     296  
FDIC assessment fees   410     393     258     213     179  
Marketing   436     225     244     279     293  
Other assets owned expenses and write-
downs
  71     13     25     24     9  
Amortization of intangibles   223     95     95     95     95  
Telephone and communications   230     106     102     107     98  
Other   943     733     649     516     431  
Total noninterest expense   12,522     7,782     7,450     7,084     7,029  
Net income from operations   7,832     5,417     4,448     4,820     5,143  
Income tax expense   2,650     1,802     1,350     1,630     1,768  
Net income   $ 5,182     $ 3,615     $ 3,098     $ 3,190     $ 3,375  
Preferred stock dividends   42                  
Net income available to common stockholders   $ 5,140     $ 3,615     $ 3,098     $ 3,190     $ 3,375  
Basic earnings per share   $ 0.26     $ 0.24     $ 0.20     $ 0.28     $ 0.32  
Diluted earnings per share   $ 0.25     $ 0.23     $ 0.20     $ 0.27     $ 0.31  
Weighted average basic shares outstanding   19,976     15,211     15,200     11,299     10,705  
Weighted average diluted shares outstanding   20,392     15,637     15,632     11,653     11,025  


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures - (Unaudited)
(In thousands except per share data and percentages)

The following table reconciles, at the dates set forth below, GAAP net income available to common shareholders to core (non-GAAP) net income, core basic and diluted earnings per share and core efficiency ratio:

    For the Three Months Ended
    September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
Net interest income (as reported)   $ 19,129     $ 12,376     $ 11,253     $ 10,520     $ 10,517  
Adjustment:                    
Income recognized on acquired loans   637     $ 135     $ 55     $ 61     $ 120  
Core net interest income   18,492     12,241     11,198     10,459     10,397  
Provision for loan losses (as reported)   752     $ 943     $ 890     $ 440     $ 238  
Noninterest income (as reported)   1,977     1,766     1,535     1,824     1,893  
Noninterest expense (as reported)   12,522     7,782     7,450     7,084     7,029  
Adjustment:                    
Merger and acquisition costs(1)   (1,391 )   (193 )   (89 )   (279 )   (195 )
Core noninterest expense   11,131     7,589     7,361     6,805     6,834  
Core net income from operations   8,586     5,475     4,482     5,038     5,218  
Income tax expense (as reported)

 
  2,650     1,802     1,350     1,630     1,768  
Tax impact of adjustments   264     20     12     76     26  
Core net income   $ 5,672     $ 3,653     $ 3,120     $ 3,332     $ 3,424  
Preferred stock dividends (as reported)   42                    
Core net income available to common
stockholders
  $ 5,630     $ 3,653     $ 3,120     $ 3,332     $ 3,424  
                     
Weighted average diluted shares outstanding    20,392     15,637     15,632     11,653     11,025  
                     
Diluted earnings per share (as reported)   0.25     0.23     0.20     0.27     0.31  
Core diluted earnings per share   0.28     0.23     0.20     0.29     0.31  
                     
Efficiency Ratio                    
Efficiency ratio (as reported)   61.52 %   58.96 %   62.62 %   59.51 %   57.75 %
Core efficiency ratio(2)   56.45 %   58.09 %   62.15 %   57.46 %   56.70 %
                     
Net Interest Margin                    
Net interest margin (as reported)   3.78 %   3.53 %   3.21 %   3.44 %   3.70 %
Core net interest margin(3)   3.66 %   3.49 %   3.19 %   3.42 %   3.65 %

___________________________

  1. Merger and acquisition costs for the quarters ended September 30, 2017, June 30, 2017 and March 31, 2017 include merger costs related to the Sovereign and Liberty acquisitions. Merger and acquisition costs for the quarters ended December 31, 2016 and September 30, 2016 only include merger costs related to the Sovereign acquisition.
  2. We calculate core efficiency ratio as core noninterest expense divided by the sum of net interest income after provision for loan losses (as reported) and noninterest income (as reported).
  3. Core net interest margin is equal to core net interest income divided by average interest-earning assets.

               

VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures - (Unaudited)
(In thousands except per share data and percentages)

The following table reconciles, at the dates set forth below, total stockholders' equity to tangible common equity and total assets to tangible assets and presents our book value per common share to our tangible book value per share:

    For the Three Months Ended
    September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
Tangible Common Equity                    
Total stockholders' equity   $ 445,929     $ 247,602     $ 242,725     $ 239,088     $ 142,423  
Adjustments:                    
Goodwill   (135,832 )   (26,865 )   (26,865 )   (26,865 )   (26,865 )
Intangible assets, net   (10,531 )   (2,171 )   (2,161 )   (2,181 )   (2,257 )
Total tangible common equity   $ 299,566     $ 218,566     $ 213,699     $ 210,042     $ 113,301  
Tangible Assets                    
Total assets   $ 2,494,861     $ 1,508,589     $ 1,522,015     $ 1,408,507     $ 1,269,194  
Adjustments:                    
Goodwill   (135,832 )   (26,865 )   (26,865 )   (26,865 )   (26,865 )
Intangible assets   (10,531 )   (2,171 )   (2,161 )   (2,181 )   (2,257 )
Total tangible assets   $ 2,348,498     $ 1,479,553     $ 1,492,989     $ 1,379,461     $ 1,240,072  
Tangible Common Equity to Tangible
Assets
  12.76 %   14.77 %   14.31 %   15.23 %   9.14 %
Common shares outstanding   22,644     15,233     15,229     15,195     10,736  
                     
Book value per common share(1)   $ 19.69     $ 16.25     $ 15.94     $ 15.73     $ 13.27  
Tangible book value per common share(2)      $ 13.23     $ 14.35     $ 14.03     $ 13.82     $ 10.55  

___________________________

  1. We calculate book value per common share as stockholders' equity at the end of the relevant period divided by the outstanding number of shares of our common stock at the end of the relevant period.
  2. We calculate tangible book value per common share as total tangible common equity, divided by the outstanding number of shares of our common stock at the end of the relevant period. Tangible book value per common share is a non-GAAP financial measure, and, as we calculate tangible book value per common share, the most directly comparable GAAP financial measure is book value per common share. Our management believes that this measure is important to many investors in the market place who are interested in changes from period to period on book value per common share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Net Interest Margin - (Unaudited)
(In thousands except percentages)
     
    For the Three Months Ended
    September 30, 2017   June 30, 2017   September 30, 2016
    Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
Assets                                    
Interest-earning assets:                                    
Total loans(1)   $ 1,643,077     $ 20,706     5.00 %   $ 1,070,436     $ 13,024     4.88 %   $ 954,053     $ 11,589     4.83 %
Securities available for sale   191,265     941     1.95     135,795     735     2.17     83,233     335     1.60  
Interest-bearing deposits
in other banks
  171,461     629     1.46     199,050     548     1.10     94,596     129     0.54  
Investment in
unconsolidated  subsidiary
  265     3     4.49     93             93     1     4.28  
Total interest-earning
assets
  2,006,068     22,279     4.41     1,405,374     14,307     4.08     1,131,975     12,054     4.24  
Allowance for loan losses   (9,910 )           (9,117 )           (8,115 )        
Noninterest-earning assets   202,352             104,819             95,901          
Total assets   $ 2,198,510             $ 1,501,076             $ 1,219,761          
Liabilities and
Stockholders' Equity
                                   
Interest-bearing liabilities:                                    
Interest-bearing deposits   $ 1,294,187     $ 2,812     0.86 %   $ 870,542     $ 1,742     0.80 %   $ 726,958     $ 1,381     0.76 %
Advances from FHLB   53,222     160     1.19     38,258     89     0.93     38,363     59     0.61  
Other borrowings   13,793     178     5.12     8,067     100     4.97     8,078     97     4.78  
Total interest-bearing liabilities   1,361,202     3,150     0.92     916,867     1,931     0.84     773,399     1,537     0.79  
Noninterest-bearing liabilities:                                    
Noninterest-bearing deposits        452,426             334,813             301,740          
Other liabilities   6,898             3,156             3,284          
Total noninterest-
bearing liabilities
  459,324             337,969             305,024          
Stockholders' equity   377,984             246,240             141,338          
Total liabilities and
stockholders' equity
  $ 2,198,510             $ 1,501,076             $ 1,219,761          
Net interest rate spread(2)           3.49 %           3.24 %           3.45 %
Net interest income       $ 19,129             $ 12,376             $ 10,517      
Net interest margin(3)           3.78 %           3.53 %           3.70 %

___________________________

  1. Includes average outstanding balances of loans held for sale of $1,553, $3,169 and $6,047 for the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, respectively.
  2. Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
  3. Net interest margin is equal to net interest income divided by average interest-earning assets.

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